In recent years, the compliance landscape for listed entities in India has undergone a fundamental transformation. Regulatory expectations have moved beyond technical adherence to filings and timelines, towards evaluating the robustness of internal systems, governance culture and decision-making frameworks, showing the Regulator’s trust deficit towards corporate governance and compliance practices adopted by listed entities.
Earlier, Regulators focused mainly on whether a company is complied. Now, the focus has shifted to “how compliance is achieved”. Regulators and Stock Exchanges increasingly ask:
- Was there a defined internal process?
- Who was responsible?
- Were checks and approvals in place?
In this evolving environment where even a minor infractions in corporate governance can lead to amplified consequences, consistent approach to deal with various circumstances is key to success. Standard Operating Procedures (SOPs) have emerged as a critical governance instrument to prove that the compliance is systematic and not accidental rather than a mere compliance formality where verbal instructions and ad-hoc practices fail
Most compliance failures stem not from lack of intent, but from lack of structured processes. SOPs bridge this gap by converting regulatory provisions into executable, organization-wide workflows.
Regulations can only set the framework, its true effectiveness depends on how deeply these reforms are internalised and applied in practice by Board and governance professionals
Why SOPs are indispensable for Listed Entities
Governance cant be just reactive in an expanding and increasingly complex market where reputational risks materialise quicker than even before. Many governance failures have arose from mindset that views governance as a procedural burden rather than a strategic asset.
SOPs are the backbone of operational consistency, quality control, and regulatory compliance, but too often, they’re overlooked or poorly executed. While most teams recognize the value of standardizing how work gets done, few take the time to build SOPs that are clear, usable, and tied to business outcomes.
Many a times a critical governance issue surfaces, not as a clear violation but as a grey area- something which is technically permissible yet institutionally uncomfortable. In such moments interpretation must be accompanied by informed judgment. Not just can we do this? But how will this be perceived by investors, Regulators, market tomorrow.
Key Drivers for SOPs adoption:
| Heightened Regulatory and Public Scrutiny |
Listed entities operate under continuous oversight from Regulators, Stock Exchanges, shareholders, analysts, and proxy advisory firms. Every disclosure, transaction, and governance decision is closely examined |
|
Limitations of Informal or Person-Driven Processes |
Reliance on individual judgement or unwritten practices exposes organisations to compliance failures, inconsistencies, and governance risks, especially in dynamic Regulatory environments. |
|
Institutionalisation of compliance |
SOPs ensure that compliance is embedded within organisational systems and processes, rather than being dependent on specific individuals. |
|
Consistency across the Organisation |
Well-defined SOPs promote uniform compliance practices across departments, functions, and subsidiaries, reducing the risk of fragmented or contradictory actions. |
|
Regulatory and audit defensibility |
SOPs provide documented evidence of structured processes, enabling the organisation to withstand Regulatory inquiries, inspections, and audit scrutiny. |
|
Clear demonstration of due care |
Documented SOPs show that the organisation has exercised due diligence, adopted standardised procedures, and implemented adequate internal controls. |
|
Support for the compliance function |
From a compliance officer’s perspective, SOPs act as a defensive shield, helping demonstrate that lapses, if any, are not due to absence of process or governance failure. |
|
Enhanced governance and accountability |
SOPs clarify roles, responsibilities, and escalation mechanisms, strengthening accountability at all levels of the organisation. |
|
Alignment with modern Regulatory expectations |
In an era where Regulators assess not only compliance outcomes but also the processes behind them, SOPs reflect governance maturity and proactive compliance management. |
Key compliance areas where SOPs play a transformational role
| Key Compliance Area |
Challenges in Absence of SOPs |
How SOPs Address the Challenges |
Governance Outcome |
|
Continuous Disclosures & Regulatory Filings |
• Material events identified too late |
• Clearly define events deemed material and those requiring materiality assessment |
• Timely, consistent, and defensible disclosures |
|
Board, Committee & General Meetings |
• Delays in agenda finalisation and circulation |
• Standardised agenda and minutes templates |
• Improved governance discipline and audit readiness |
|
Whistle Blower Mechanism & Ethical Governance |
• Informal or inconsistent handling |
• Define intake, classification, and investigation workflow |
• Fair, transparent, and unbiased handling of complaints |
|
Related Party Transactions (RPTs) |
• Difficulty in identifying indirect RPTs |
• Establish a centralized related party master |
• Transparent, compliant and well controlled RPT framework |
|
Insider Trading & UPSI Management |
• Inconsistent identification of UPSI |
• Define what constitutes UPSI in operational terms |
• Strong defence against insider trading risks |
|
Subsidiary & Group-Level Compliance Oversight |
• Delayed or incomplete reporting from subsidiaries |
• Standardise compliance reporting formats and timelines |
• Effective group-wide governance and Regulatory compliance |
Key Principles while drafting SOPs
SOPs must be:
| Business-Aligned |
SOPs should mirror real business workflows, not theoretical compliance models. |
|
Role-Based & Accountable |
Every step should clearly identify initiator, reviewer and approver. |
|
Regulator-Defensible |
SOPs should be robust enough to be presented before SEBI, Stock Exchanges and Audit Committee |
|
Dynamic & Review-Oriented |
Given frequent Regulatory changes, SOPs in order to adjust with dynamic external environment and Regulatory updates, must allow periodic updates to reflect changes and improvements, version control and change logs. |
|
Supported by Training & Awareness |
Even the best SOP is ineffective if stakeholders are unaware of their responsibilities. |
|
Implementation check |
Should provide for effective mechanism for reviewing effective implementation at periodic intervals. |
Role of Compliance Officer
The company officer plays a pivotal role in bridging the gap between Regulatory form and governance substance. As the first line of governance oversight, the compliance officer is often the earliest to identify structural gaps, emerging risks, and inconsistencies between compliance outcomes and the underlying processes. Recognising patterns and ensuring timely escalation are not mechanical tasks; they require professional judgement, ethical clarity, and a deep understanding of Regulatory intent.
The role of the compliance officer in listed entities will continue to expand—not in terms of volume of compliances, but in depth of responsibility. As capital markets grow more complex, investors more discerning, and information travels faster than ever, reputational risks will materialise with unprecedented speed.
It is often said that governance failures are obvious in hindsight. the real test lies in foresight, in recognising early signals and responding before trust is eroded. Market can tolerate business risk but struggle to tolerate governance uncertainty.
Corporate governance in listed entities is often discussed in terms of regulations, board composition, committee structures, disclosures, thresholds which are, of course, necessary, but governance at its core is not merely about procedural compliances. Its about the credibility in how the decisions are taken, how conflicts are managed, how information is shared with the investors. It is the mechanism through which dispersed shareholders place trust in those who manage their capital and ensure that power is exercised with constraint and discretion is accompanied by accountability.
Instead of relying on senior employees for guidance new hires can refer to SOPs to learn standard procedures and reduce training time and employees know what’s expected of them and are more accountable and productive.
When done right, SOPs do far more than check a box. They protect institutional knowledge, reduce costly mistakes, improve training and onboarding, and ensure teams perform at a consistently high level, regardless of location, role, or experience driving long term growth of organisation.
